Problem 4-4A a-d (Video) (Part Level Submission) Benton Corporation produces two grades of non-alcoholic wine from grapes that it buys from California growers. It produces and sells roughly 3,000,000 liters per year of a low-cost, high-volume product called CoolDay. It sells this in 600,000 5-liter jugs. Benton also produces and sells roughly 300,000 liters per year of a low-volume, high-cost product called Lite Mist. Lite Mist is sold in 1- liter bottles. Based on recent data, the CoolDay product has not been as profitable as Lite Mist. Management is considering dropping the inexpensive CoolDay line so it can focus more attention on the LiteMist product. The LiteMist product already demands considerably more attention than the CoolDay line. Jack Eller, president and founder of Benton, is skeptical about this idea. He points out that for many decades the company produced only the CoolDay line and that it was always quite profitable. It wasn't until the company started producing the more complicated LiteMist wine that the profitability of CoolDay declined. Prior to the introduction of Lite Mist, the company had basic equipment, simple growing and production procedures, and virtually no need for quality control. Because LiteMist is bottled in 1-liter bottles, it requires considerably more time and effort, both to bottle and to label and box than does CoolDay. The company must bottle and handle 5 times as many bottles of Lite Mist to sell the same quantity as CoolDay. CoolDay requires 1 month of aging; Lite Mist requires 1 year. CoolDay requires cleaning and inspection of equipment every 10,000 liters; Lite Mist requires such maintenance every 600 liters. Jack has asked the accounting department to prepare an analysis of the cost per liter using the traditional costing approach and using activity-based costing. The following information was collected. Direct materials per liter Direct labor cost per liter Direct labor hours per liter Total direct labor hours CoolDayLite Mist $0.40 $1.20 $0.50 $0.90 0.07 0.08 210,000 24,000 Estimated Use of Cost Drivers per Product Cost Drivers Activity Cost Pools Grape processing Aging Bottling and corking Labeling and boxing Maintain and inspect equipment Cart of grapes Total months Number of bottles Number of bottles Number of inspections Estimated Overhead $146,678 673,200 286,200 233,100 242,400 $1,581,578 Estimated Use of Cost Drivers 6,600 6,600,000 900,000 900,000 800 CoolDay 6,000 3,000,000 600,000 600,000 350 LiteMist 600 3,600,000 300,000 300,000 450 decimal places... 12.250.) under traditional product casting using direct labor hours. compute the total manufacturing cost per liter of both products. (Round answers to CoolDay Lite Hist Manufacturing cost per liter Under ABC, prepare a schedule showing the computation of the activity based overhead rates. (Round overhead rates to decimal places,.. 12.250.) Activity Case Pools Estimated Overhead of Cost Drivers Activity-Based Overhead Rates per cart Grape processing per month Botting and corking per bottle per battle Labeling and bosing Maintain and get uipment per inspection Prepare a schedule assigning each activity's overhead cost pool to each product, based on the use of cost drivers. Include a computation of overhead cost per ker. (Round overhead rate, cost per her to 3 decimal places,.. 12.250 and cost assioned the decimal places, .. 12.250.) Activity Cost Pool Expected Use of Cost Drivers CoolDay Activity-Rased Overhead Rates Cost Assigned Expected Use of Listist Activity-Based Overhead Rates Cost Assigned Grape processing Apling Bottling and corking Labeling and being Maintain and inspect equipment Total costs assigned Liters produced Overhead cost per liter Compute the total manufacturing cost per liter for both products under ABC. (Round overhead cost per liter to 3 decimal places, e.g. 1.225.) CoolDay Lite Mist Manufacturing cost per liter